Archive for month: February, 2017

Did you know that you can claim your Boyfriend or Girlfriend (Partner) on your Personal Tax return!! However there are a few criteria you must meet in order to take advantage of this little known rule.

In order to take advantage of this, your partner must meet the following tests…

The Partner must be a U.S. Citizen, Resident Alien or a Resident of Canada or Mexico

Can not be the Qualifying Child of the taxpayer

You must have lived together the entire year as a member of your family and cohabitation must not be against the law in your state (FYI in Wisconsin, it’s not, I just looked)

She/He can’t have earned over $4,050

You must have paid more than ½ her/his living expenses during 2016

And, he/she must not be able to be claimed by anyone else (ie his/her parents, grandparent, etc)

Well.. Once again, we made it through the 1099 filing season without too many issues. But it does seem that EVERY year there is one or two vendors that outright REFUSE to provide the Tax Payer Information so that you, as a business, can get your 1099s out by the January 31st filing deadline. Having completed these information returns for over 20 years, it always surprises me when I get that one vendor that becomes belligerent about providing the information. The first thing that pops in my head is that they don’t want the IRS or the State Revenue Department knowing that they are getting income from someone. Now, if it’s on a personal level, the IRS doesn’t require INDIVIDUALS to issue 1099s to the Plumber, the Carpenter or the Landlord that you pay in your personal life. But if you are a BUSINESS, in order to deduct those same expenses on your business tax return, you AS A BUSINESS, are required to issue those pesky 1099-MISCs indicating that you paid someone $600 or more during the calendar year.

So, what do you do when you encounter one of these vendors.

First and foremost – CHANGE YOUR INTERNAL POLICY!! Make it a policy in your business that if you issue payment to ANYONE for services, that you do not issue a check until you collect the W-9 Form from them! It’s so much easier to just tell them that your system doesn’t allow for payments to be issued UNLESS this information has been entered into the software. And you can of coarse use the “My accountant won’t let me issue checks without this” excuse. Let us take the heat if that’s easier. But get the W9 form upfront! It will also make the payee much less uncomfortable providing the info when it’s a payment they seek. If/when you ask for that information a year later, they may not even remember doing business with you in the first place.
But ok, you’ve already paid them so now what? I typically use a 3 step process….

First attempt, I start with calling, emailing or faxing to collect the information from them. 99% of the time, this is all I need to do. Most businesses understand that they are required to provide you with this information and don’t make a fuss about it. Sometimes it may take 2-3 attempts, but normally they will send the information. THAT BEING SAID… If you are the RECIPIENT… Don’t just send the W9 out because you get asked! Be sure that you actually did do business with the Person/Business that is requesting the information. Remember that ID thieves will try any number of methods to obtain your information so just take a bit of caution before you just send this out!! And if, you don’t feel comfortable giving us, the accounting firm, the information, just indicate to the requester (if it’s not the business owner asking) that you gave it to your customer. We, the accounting firm, will understand and can the get the information from our client.
Second attempt, I send another email or call indicating that if they don’t provide the information that the IRS REQUIRES the payee to withhold 28% of all payments because they failed to provide the information. This is right on page 2 of the W9 form, and usually, this is more than enough of a deterrent for the provider to give in and provide the information – again, to the recipient… if you don’t feel comfortable giving it to someone just because they say they are an accounting firm… give it to your customer and tell the accounting firm you did so!
Third and final attempt, make my last communication much more stern. I indicate to the recipient that this is something that they are required to do, that the IRS requires that they provide this information and if they don’t provide it, I am required to send a 1099 anyway to the IRS with the words “Refused to Provide” where the tax ID is supposed to go on the form. Have I had to do this? Yes unfortunately. It amazes me to no end that someone would think that I’d waste my valuable time trying to collect something that I really truly didn’t need. Now, back to my first step, do I get that they are being cautious when I, an outsourced accounting firm calls…. YES, but they could just give the info to their customer and let their client give it to me. I’m good with that, just don’t outright refuse to do this!
Finally, when every attempt has failed and the supplier/vendor/service provider just outright refuses, I send the 1099 just as I indicated I would with the words “Refused to Provide” in the box labeled Recipient’s Identification number. I then send this 1099 and a letter to the IRS explaining that this business refused to provide the tax identification number. You may be wondering, why do I bother to do this? I do this because the fines to my clients could be SO huge that I want to be sure that we have done everything that I am required to do to ensure that my client does not end up with the fines. After all it wasn’t their fault that their vendor refused causing them to not have the information they needed.

Moral of the story…. Get the W-9 form before you even give them the check! It’s so much eaiser.